Memorandum
To:
Board of Directors/Compliance Committee
[Insurance Company Name]
From:
[Law Firm/Your Name], Legal Counsel
Date:
16 July 2025
Subject:
Obligations for Insurance Companies under IRDAI AML/CFT Guidelines and Reporting to FIU-
IND
Executive Summary
This memorandum provides a legal overview and recommended compliance steps for your
responsibilities as an insurer and reporting entity under the Master Guidelines on Anti-Money
Laundering/Counter Financing of Terrorism (AML/CFT) issued by the Insurance Regulatory and
Development Authority of India (IRDAI). The focus herein is on mandated procedures, internal
controls, and timely, accurate reporting to the Financial Intelligence Unit-India (FIU-IND) [1] .
1. Legal Obligations
a. Background
The Prevention of Money Laundering Act, 2002 (PMLA) and Prevention of Money-
Laundering (Maintenance of Records) Rules, 2005 apply to all insurers (excluding pure
reinsurance business).
IRDAI, under Sections 34 of the Insurance Act, 1938 and 14(1) of IRDA Act, 1999, mandates
compliance with AML/CFT guidelines and notification requirements [1] .
b. Reporting Entity Status
As a reporting entity, your organization must maintain procedures for customer due
diligence (CDD), record-keeping, monitoring, and regulatory reporting [1] .
2. Organisational Preparedness
a. Policy Implementation
Establish and implement internal policies, procedures, and controls to prevent and detect
money laundering and terrorist financing.
Senior management must approve and periodically review the AML/CFT programme.
Ensure all policies are communicated to relevant staff and frequently updated per evolving
laws/regulations [1] [2] .
b. Appointment of Officers
Appoint a “Designated Director” for overall regulatory compliance.
Appoint a “Principal Officer” (not below the Head–Audit/Compliance/Chief Risk Officer)
responsible for AML/CFT implementation and reporting to authorities.
Notify IRDAI and FIU-IND of appointments and any changes within 7 days [1] [2] .
3. Reporting to FIU-IND
a. Obligatory Reports
Insurers are required to furnish the following to the Director, FIU-IND under Rule 3 of PML
(Maintenance of Records) Rules:
Suspicious Transaction Reports (STR)
Cash Transaction Reports (CTR)
Counterfeit Currency Reports (CCR)
Non-Profit Organization Transaction Reports (NTR), where applicable
Delays in filing or correcting these reports constitute separate violations for each day of non-
compliance [1] [2] .
b. Reporting Formats
Use the FIU-IND prescribed electronic formats for CTR and STR.
Ensure the systems/software used generate alerts for transactions inconsistent with
customer profiles or risk categories [1] .
c. Confidentiality
Maintain strict confidentiality on the fact of reporting STRs. No restrictions may be placed
on accounts solely due to STR filing.
Any disclosure to customers about reported STRs is strictly prohibited (“tipping off”) [1] [2] .
4. Record-Keeping & Audit
Maintain transaction records and customer identification documentation for at least five
years from transaction date or end of business relationship for settled contracts.
Ensure accessibility for timely response to law enforcement or regulatory requests.
Internal and external audits must verify AML compliance at least annually [1] [2] .
5. Key Procedures
a. Know Your Customer (KYC) & Client Due Diligence (CDD)
Conduct KYC/CDD at:
Initiation of business relationship
Payout/claims
Any subsequent remittances inconsistent with known customer profile
Collect KYC documents as per latest regulatory lists for both individuals and entities [1] .
Upload KYC data to Central KYC Registry (CKYCR) as required [1] .
b. Enhanced and Simplified Due Diligence
High-risk customers (e.g., non-residents, PEPs, trusts, NGOs) require enhanced scrutiny and
documentation.
Free look cancellations, third-party assignments, and unusual premium payments must be
examined [1] [2] .
6. Training and Screening
All employees/agents must be trained on AML/CFT/combating terrorism financing.
Maintain records of all training provided.
Have adequate screening procedures in recruitment, especially for high-risk or compliance-
centric roles [1] [2] .
7. Risk Assessment
Perform an annual ML/TF risk assessment, documenting controls for
customer/product/geographic/channel vulnerabilities.
Classify customers as high or low risk and apply appropriate monitoring [1] [2] .
8. Compliance Steps Checklist
Step Responsibility Frequency
Board approval of AML/CFT policy Board/Senior Management Annual
Designated Director/PO appointment HR/Compliance As needed
Staff and agent AML training HR/Compliance Ongoing/Annual
Ongoing risk assessment Compliance/Management Annual
Timely FIU-IND reporting (STR/CTR/CCR) Principal Officer As needed
Internal audit of AML/CFT Internal Audit Annual
Record maintenance/review Operations/Compliance As per guidelines
9. Consequences of Non-Compliance
Penalties may be imposed by FIU-IND and IRDAI on the company, Designated Director,
Principal Officer, or employees for failures in compliance.
Breach may result in financial penalties, reputational damage, or criminal liability [1] [2] .
Conclusion
All reporting entities in the insurance sector must maintain vigilant, robust compliance with the
IRDAI Master Guidelines and timely, accurate reporting to FIU-IND. Please ensure your internal
processes, training, documentation, and oversight are aligned, and update frameworks regularly.
Non-compliance is subject to stringent penalties and reputational risk.
If further clarification or policy review is required, please advise.
[End of Memorandum]
⁂
1. Annexure-A-AMLCFT01062022.pdf
2. AntiMoneyLaunderingAMLPolicy.pdf
